Material Participation Time Examples

By Jason Watson, CPA
Posted Sunday, August 31, 2025

Here is a big list of tasks and efforts that count towards material participation and an equally big list that do not count. Sure, some of this is redundant since defining what time you cannot count towards material participation is easily converted into what you can count with a flip of some words, but you’ll get the idea.

Also, before we get into the big lists, keep in mind two things- improper corroboration and inadequate record keeping are the downfalls to most taxpayer arguments, and second, don’t stop counting hours once you hit your 500- or 100-hour marks (depending on which test you are shooting for).

Things That Count Towards Material Participation

As promised, here is a decent-sized list of things that count towards material participation hours-

• Collecting rent from tenants or guests
• Advertising rental property for lease
• Screening tenant or guest applications
• Negotiating and executing lease or rental agreements
• Directly managing or supervising repair contractors (this one is tricky)
• Performing repairs yourself
• Procuring and reviewing hazard insurance
• Bookkeeping for the rental property (but not reviewing financial statements, subtle)
• Decorating/staging the rental property
• Conducting safety inspections (but let’s not get carried away)
• Renovating an in-service property (the in-service part is critical)
• Meeting tenants and guests about issues
• Responding to maintenance calls (but simply being on-call does not count)
• Purchasing supplies (but let’s not dilly dally)
• Coordinating tenant move-in and guest check-in, including when they leave
• On-site management visits (same warning as safety inspections)
• Reviewing local compliance requirements including Airbnb and VRBO
• Filing permits for rental operations
• Supervising employees such as your children who are on payroll
• Communicating with city inspectors
• Managing utilities for rental property (negotiating internet service, for example)
• Paying HOA dues and managing HOA compliance
• Attending HOA meetings if they are specific to operations
• Attending zoning or city council hearings for rentals
• Preparing property for new tenants or guests (turnover cleaning)
• Filing property tax protests/appeals (which you should do every two years, always)
• Meeting with attorneys and tax professionals
• Coordinating landscaping or lawn care services, including pest control
• Reviewing and signing vendor contracts such as trash or pool service
• Tracking and reconciling rent payments
• Drafting and reviewing tenant or guest communications
• Inspecting property after storms or damages
• Preparing documentation for tax return (if directly rental-related)

As mentioned elsewhere, be careful of how thick your pencil is- in other words, logging 32 hours to replace a toilet or spending 12 hours shopping for towels seems unreasonable. Attending HOA meetings is a mixed bag- if the meeting is specific to operations such as short-term rental compliance, parking lot maintenance or guest rules for grills and fireplaces (for example), then this time counts. General HOA nonsense like budgets and community events probably do not count towards material participation.

Also, keep in mind that time spent performing tasks on short-term rental activities does not count towards the 750 hours for real estate professional status. This is generally because STRs are not rental activities- they are businesses, and to make things worse, they are not real estate businesses. However, time would still otherwise count towards material participation for REPS (recall that there is a 3 part test- 750 hours in real estate, more than 50% of your time spent across all activities including W-2 jobs is spent in real estate, and you materially participate in the rental property activity).

Things That Don’t Count

Another list for your groaning pleasure-

• Researching future investment or rental properties
• Reading market reports (yawn) or AirDNA (fun)
• Browsing Zillow or MLS listings (totally fun and addictive, right?)
• Building ROI spreadsheets for new acquisitions
• Meeting brokers for acquisition discussions
• Reviewing rental property financials for own analysis (but what about for a lender?)
• Continuing education courses including reading real estate blogs/newsletters
• Being “on call” without actual work performed (need to lift a finder at least)
• Renovating property before placed in service (again, this is a big gotcha)
• Travel time considered commuting (no home office or rental in your resident city)
• Travel with personal errands mixed in (you would never)
• Working as employee of real estate firm (<5% owner)
• Dreaming or thinking about rental properties
• Travel without evidence of being involved in day-to-day managerial operations
• Preparing financial summaries for your own portfolio or personal financial statement
• Attending real estate investment seminar
• Researching tax strategies (but talking to WCG CPAs & Advisors about them, sure!)
• Networking events not directly tied to your rental properties
• Meals (and drinks) with real estate professionals
• General investor club meetings
• Meeting with mortgage lenders for future loans
• Reviewing potential loan options for acquisitions (not in-service yet)
• Preparing hypothetical budgets for “maybe” deals
• Performing due diligence on a property not yet purchased (darn in-service thing again)
• Talking with other investors about their rentals
• Comparing financing structures theoretically

Some tasks and efforts that do not count towards material participation might still count towards the 750 hours for real estate professional status. Examples might include building ROI spreadsheets for new acquisitions, meeting with real estate brokers and lenders, and performing due diligence on real estate investments. Don’t forget about renovations before in-service where you work with architects, designers and contractors, and then supervise the work.